Top 1 percent took record share of 2012 U.S. income

Tim Loh

Published 9:12 pm, Tuesday, September 10, 2013

The income gap between America's richest 1 percent and everybody else, which by some estimates is at its starkest in southwest Connecticut, has surpassed a previous record set back in the Roaring 1920s.

The top 1 percent of U.S. earners collected 19.3 percent of all household income in 2012, their largest stake in Internal Revenue Service figures in at least a century. The previous peak of 18.7 percent came back in 1927, according to an analysis of IRS figures dating to 1913 by economists at the University of California, Berkley, the Paris School of Economics and Oxford University.

U.S. income inequality has been growing for almost three decades.

By 2010, the Stamford-Norwalk-Bridgeport metropolitan region, which comprises most of Fairfield County, ranked as the country's most stratified in terms of income, according to the U.S. Census.

That reality owed in large part to opposing trends. On one hand, decades of industrial flight gutted large swaths of Bridgeport, Norwalk, Stamford, the Naugatuck River Valley and parts of this region's suburbs, leaving shells of factories, brownfields and a dearth of middle-class jobs.

Meanwhile, there was an influx of hedge fund, investment banking and other high-paying finance jobs, which experienced ever-increasing paychecks and bonuses both here and in New York City -- while executive pay soared to record heights.

In 2012, for example, the average cash bonus on Wall Street rose by an estimated 9 percent to almost $121,900, according to the New York City comptroller's office.

Between 2000 and 2010, the only group of Fairfield County households to see real income growth was the top 1 percent, once adjusted for inflation (see accompanying chart), according to a study of the 2010 Census figures by University of Connecticut economist Dr. Jeremy Pais for Hearst Connecticut Newspapers.

That reality formed much of the backdrop behind the Occupy Wall Street protests that engulfed U.S. cities in the fall of 2011.

To be sure, the richest Americans were hit hard by the financial crisis. Their incomes fell more than 36 percent in the Great Recession of 2007 to 2009 as stock prices plummeted. Incomes for the bottom 99 percent fell just 11.6 percent, according to the analysis of IRS figures.

But since the recession officially ended in June 2009, the top 1 percent have enjoyed the benefits of rising corporate profits and stock prices: 95 percent of the income gains reported since 2009 have gone to the top 1 percent.

Last year alone, the incomes of the top 1 percent of Americans rose 19.6 percent, compared with a 1 percent increase for the remaining 99 percent.

That compares with a 45 percent share for the top 1 percent in the economic expansion of the 1990s and a 65 percent share from the expansion that followed the 2001 recession.

UC-Berkley researcher Emmanual Saez said the incomes of the richest Americans might have surged last year in part because they cashed in stock holdings to avoid higher capital gains taxes that took effect in January.

The income figures include wages, pension payments, dividends and capital gains from the sale of stocks and other assets. They do not include so-called transfer payments from government programs such as unemployment benefits and Social Security.